Electronic Funds Transfer at Point of Sale (EFTPOS) systems have revolutionized the way businesses process transactions. However, for many merchants, the cost of using EFTPOS can quickly add up, cutting into profit margins. Understanding how to manage and reduce these fees effectively can help businesses increase profitability while still offering convenient payment options to customers.
Understanding EFTPOS Merchant Fees
EFTPOS merchant fees are the charges that businesses incur for processing card transactions. These fees are typically composed of:
- Merchant Service Fees (MSF): A percentage of each transaction, charged by the acquiring bank. These fees vary based on the card type, industry, and transaction volume.
- Interchange Fees: Set by card networks (Visa, Mastercard, etc.), these fees compensate issuing banks for processing transactions. Interchange fees are usually non-negotiable and vary depending on factors such as card type and transaction method.
- Scheme Fees: Fees imposed by card networks to facilitate transactions. These fees are usually passed on by the payment provider to the merchant and can fluctuate based on transaction volume and the specific agreement with the card network.
- Terminal Rental Fees: Monthly costs for leasing an EFTPOS terminal. Some providers may charge additional fees for maintenance and upgrades.
- Other Miscellaneous Charges: These may include chargeback fees, statement fees, and batch processing fees, which can add up over time if not carefully monitored.
By understanding these components, businesses can identify opportunities to reduce costs and maximize profitability.
Strategies to Reduce EFTPOS Merchant Fees
1. Negotiate Better Rates with Your Provider
Many businesses accept the default rates given by their payment providers without questioning them. However, banks and payment processors are often open to negotiation, especially for businesses with high transaction volumes. Consider the following:
- Ask for a lower Merchant Service Fee (MSF) based on your transaction volume. A higher volume of transactions gives you more leverage to negotiate better rates.
- Negotiate a fixed rate for EFTPOS transactions rather than a percentage-based fee, especially if your business has a high average transaction value.
- Request discounts on terminal rental fees, especially if you process a high number of transactions or agree to a long-term contract with the provider.
- Inquire about bulk transaction discounts that may be available for businesses processing a large number of transactions.
2. Switch to a Competitive Payment Provider
Not all EFTPOS providers charge the same fees. Comparing different payment processors can help you find a more cost-effective solution. When evaluating providers, consider:
- Transaction fees and hidden costs. Ensure you understand all costs involved, including flat fees, percentages, and any surcharges.
- Reliability of service and customer support. A provider with excellent support can help resolve issues quickly, preventing downtime.
- Integration with your existing business systems. Some payment providers offer seamless integration with POS systems, accounting software, and online stores.
- Contract terms and exit fees. Be wary of long-term contracts with high exit penalties.
APS offers competitive EFTPOS solutions that can help businesses lower their processing costs while providing seamless payment experiences.
3. Encourage Low-Cost Payment Methods
Not all transactions are charged the same fees. Debit card transactions usually have lower interchange fees than credit cards. You can encourage customers to use low-cost payment options by:
- Offering discounts for customers who pay via debit cards instead of credit cards.
- Implementing surcharge strategies for high-cost payment methods to cover processing fees while remaining compliant with regulations.
- Providing alternative payment options like direct bank transfers or mobile payment solutions to reduce reliance on traditional EFTPOS transactions.
- Educating customers about the benefits of using lower-cost payment methods to minimize fees for both parties.
4. Optimize Your EFTPOS Terminal Settings
EFTPOS terminals can be configured to route transactions through lower-cost networks. Consider these optimizations:
- Least-cost routing (LCR): This automatically processes debit card transactions through the lowest-cost network, saving businesses on interchange fees.
- Setting up surcharging correctly: Ensure that any surcharges applied align with regulations while helping you cover processing costs.
- Regularly reviewing terminal settings to ensure they are configured for cost efficiency and compliance.
- Utilizing contactless payment options to reduce transaction processing times and enhance customer experience.
Learn more about in-person payment solutions that can help you manage these settings effectively.
5. Reduce Chargebacks and Fraudulent Transactions
Chargebacks not only lead to direct financial losses but also increase your overall merchant fees. Reducing chargebacks can help lower costs. Strategies include:
- Implementing strong verification measures for card-present and online transactions, such as requiring PINs or multi-factor authentication.
- Providing clear refund and return policies to avoid disputes and ensure customer satisfaction.
- Using fraud detection tools to identify and block suspicious transactions before they result in chargebacks.
- Training staff on best practices for handling disputes and chargebacks to minimize losses.
6. Consolidate Payment Processing Services
If you use multiple providers for different payment methods, consolidating under one provider may reduce costs. A single provider often offers volume-based discounts, which can lower your effective transaction costs. Benefits of consolidation include:
- Simplified reconciliation and reporting.
- Lower overall transaction fees due to bulk processing discounts.
- Enhanced security and compliance with a single integrated system.
7. Monitor and Analyze Your Transaction Data
Regularly reviewing your transaction data can reveal patterns and areas where costs can be reduced. Use data analytics to:
- Identify which payment types incur the highest fees and encourage customers to use lower-cost alternatives.
- Detect unnecessary charges from your payment provider and negotiate better terms.
- Optimize pricing strategies to balance customer convenience and cost-effectiveness.
- Track peak transaction periods to improve cash flow management.
Conclusion
Reducing EFTPOS merchant fees is an effective way to boost profitability without compromising the customer experience. By negotiating better rates, optimizing transaction processing, and leveraging data-driven strategies, businesses can lower costs and increase revenue. Additionally, selecting a cost-effective payment provider like APS can make a significant difference in overall transaction expenses.
For businesses looking to improve their in-person payment solutions, APS’s EFTPOS services provide an efficient and cost-effective way to manage transactions while maximizing profitability. By implementing these strategies, businesses can ensure they’re not overpaying on merchant fees while maintaining a seamless and customer-friendly payment experience.